Gas Exports to Iraq, Turkey to Generate $7b

Gas Exports to Iraq,  Turkey to Generate $7bGas Exports to Iraq,  Turkey to Generate $7b

The National Iranian Gas Company (NIGC)’s assessments suggest that export of gas to Iraq and Turkey in the next Iranian calendar year (begins March 21) will generate up to $7 billion in revenues, said NIGC managing director, Hamidreza Araqi.

Gas prices would differ depending on whether it will be exported in the form of liquefied natural gas (LNG) or via pipelines, Fars news agency quoted the official as saying.

The price will be determined according to each shipment’s spot price if gas is exported in the form of LNG. But if it is exported via pipeline, the price will be stipulated in a gas export contract.            

“Gas prices vary in NIGC export contracts,” Araqi said, adding, “The contracts signed with Iraq, Pakistan, Turkmenistan, and Turkey differ as the pricing formula is different for each case.”

There are numerous factors affecting the price difference. This was the basis of Turkey’s claim against Iran, maintaining that the price of Iranian gas was higher than that of Russia and Azerbaijan from wherefrom Turkey also imports gas.

In 2012, Turkey’s BOTAS went to an international court of arbitration for a ruling on gas pricing as well as supplied volume. “We strongly defended the case,” Araqi said, noting that Iran was acquitted on Turkey’s price reduction claim.

In its first decision on Iran-Turkey gas dispute, the International Court of Arbitration also ruled against Turkey’s complaint that Iran deliver insufficient amount of gas to its western neighbor. However, decision on pricing formula is still pending.

Iran exported 10 billion cubic meters of gas in the past year. The revenues thereof were not specified accurately, but it has been “estimated at $4-5 billion,” according to Araqi. There are plans to export 30-50 million cubic meters of gas per day to Iraq, the revenues from which is estimated at $4-6 billion. “Export of gas to Europe, Pakistan, and Oman is not finalized yet.”

Gas export volume has increased eight percent during the current Iranian calendar year compared with the same period last year, owing to an increase in gas production from the South Pars gas field. Export volume has exceeded imports by 2.5 billion cubic meters, indicating a positive gas trade balance.

Currently, Iran exports natural gas via pipelines to three neighboring countries – Turkey, Armenia, and Azerbaijan. Turkey receives more than 90 percent of Iran’s natural gas exports under a long-term contract. Armenia and Azerbaijan have swap arrangements with Iran that account for 6 percent and 3 percent of Iran’s natural gas exports, respectively. Armenia exports electricity to Iran to compensate for the natural gas volumes it receives.

Iran holds the world’s second biggest natural gas reserves after Russia, which accounts for 17 percent of the world’s proved natural gas reserves.